Press Releases

The complete guide to compliance for landlords for landlords and lettings agents - January 2010

Comment by Mark Quigley, MD of C.A.R.L Communications

The list of legal requirements for landlords and lettings agents seems endless and somewhat confusing, but they are an essential part of today's industry that all agents must fully comply with. It is apparent that some lettings agents are failing to comply with all of the legal requirements and the penalties can be severe with fines and, ultimately, business closure for extreme cases.

As a general rule, landlords and agents are responsible for the safety of their tenants whilst they are in the property. The law states you must maintain the property and undertake any major repairs that are required. This includes anything that affects the structure and exterior.

Mark Quigley, Managing Director of C.A.R.L Communications outlines the key legal requirements for landlords and lettings agents.

Gas Safety Checks

By law, landlords are required to ensure gas fittings and flues are maintained in a safe condition, with appliances serviced in accordance with the manufacturer's instructions, or checked annually unless advised otherwise by a Gas Safe registered engineer.

Landlords also must ensure an annual safety check is carried out on each gas appliance/flue and before any new lease starts, the landlord must make sure that these checks have been carried out within one year before the start of the lease date, unless the appliances in the property have been installed for less than 12 months, in which case they should be checked within 12 months of their installation date.

Landlords are required by law to have all installation, maintenance and safety checks carried out by a Gas Safe registered engineer and keep a record of each safety check for at least two years, as well as issue a copy of the latest safety check record to existing tenants within 28 days of the check being completed, or to any new tenant before they move in.

Electrical Appliances, Equipment and Wiring Testing

Landlords are required by law to ensure that the electrical installation in a property is safe when a tenancy begins, that the electrical installation is maintained in a safe condition throughout the tenancy and that any appliance provided is safe, with minimum safety standard of a CE marking.

Landlords need to carry out regular basic safety checks to ensure the electrical installation and appliances remain in good working order and, although it is not compulsory, it is considered best practice for a good landlord to have an electrical inspection carried out by an electrician before a new tenant moves in, with a copy of the inspection report (the periodic inspection report) made available to the tenants.

If the landlord rents out a property with multiple tenants then they have to have the electrical installation checked every five years and a periodic inspection report showing the property continues to be electrically safe must be available.

Smoke Alarms & Carbon Monoxide

All properties built since June 1992 must have interlinked mains-connected smoke detectors/alarms on each floor of the property. Smoke alarms must be checked regularly to ensure that they are in full working order. A carbon monoxide detector should also be supplied but is not compulsory.

Best practice dictates landlords or agents should supply new batteries at the beginning of each tenancy and this should form part of the inventory. Tenancy agreements should also compel tenants to test alarms at least weekly.

Soft Furnishings

All soft furnishings must comply with the Furniture and Furnishings (Fire) Safety Regulations 1988 and be fire safety compliant so landlords will need to check the fire safety label on all furnishings. Any furniture without a safety label should be removed.

Finance and Accounting

Professional accounting practices are vital for letting agents to ensure their business is fully compliant with HM Revenue and Customs and Companies House. Lettings agents must place a great deal of importance on attention to detail for all aspects, such as reconciling balances and making landlords aware of all fees, especially on property maintenance work.

Agents who reach the VAT threshold need to register for VAT and charge VAT for all services supplied by themselves, except credit card fees, but note that landlord's VAT requirements are their own responsibility. Agents should pass copies of contractor's invoices to landlords so that, in the rare cases landlords are VAT-registered, they have a record of VAT paid. Rent and deposits are not liable for VAT under any circumstances.

The only time an agent can be liable for VAT on a contractor's invoice (where work has been done for a landlord) is if they mark-up the invoice without disclosing the mark-up to the landlord. The resulting impact can be damaging to the agent upon a VAT inspection.

It is not permitted to overdraw client's money, either by way of an overdraft or by paying landlord A's expenses from landlord B's income. If there has been any loss to a clients' money as a result of banking errors, overdrawing, incorrect withdrawal or administrative errors, the agent should immediately reimburse it from office funds.

Energy Performance Certificates

October 2007 saw the introduction of EPCs. This is an extension of the HIP scheme introduced for house sales which means that all properties that are on the market to let must have an EPC that must be available for inspection by prospective tenants. Once an EPC has been obtained it is valid for 10 years. There is an exception to this rule for certain types of houses with multiple occupation (HMO), where each HMO tenant is given an individual tenancy agreement.

Tenancy Deposit Scheme

Tenancy Deposit legislation was introduced in 2007 to protect tenants' deposits by requiring letting agents/landlords to register the deposit for all new tenancies with one of three Government-approved Schemes: the DPS (Deposit Protection Service), TDS (The Tenancy Deposit Scheme) and MyDeposits. If a tenant's deposit is not registered with a scheme within 14 days, the tenant can legally demand three times the amount of deposit in compensation, highlighting the importance for all agents to register to an approved scheme.

The legislation came into effect on 6 April 2007, meaning that all deposits taken for Assured Short Hold Tenancies after that date must covered by a tenancy deposit protection scheme, but landlords do not have to use a tenancy deposit protection scheme for deposits paid before 6 April 2007, unless the tenancy has been renewed after this date.

Evictions

Giving Notice

Landlords need to remember that once a short hold agreement is signed, tenants cannot be evicted without a good reason within the first 6 months of their tenancy. Even if a shorter fixed period has been agreed, tenants will not be subject to eviction unless they break the rules of the tenancy agreement. Even after this time, the landlord must give 2 months notice to move out of the property, unless otherwise agreed by both parties before the tenancy starts.

If a landlord wants to visit their property, they have to give the tenant 24 hours notice before they can enter. Although the property is legally the landlord's, a tenant has the right to live peacefully and without disturbance.

Evicting A Tenant

After the initial 6-month period, if no longer fixed-term has been agreed then a landlord can give a tenant notice and evict them at any time for no reason. However, if the landlord fails to give proper notice, they cannot evict until they has followed the legally defined procedure, including issuing a correct notice (Section 21) and providing the correct notice period. A tenant can only be evicted if a breach of contract has occurred during a fixed-term - for example, due to a failure to pay rent or causing a serious nuisance, like drug dealing.

However, even if a tenant is in rent arrears, a landlord has to serve the proper papers and follow certain procedures to evict them. The landlord has to first serve the tenant notice of their eviction using a Section 8 notice and then apply to the courts for a possession order. Not until a possession order has been granted can a landlord actually evict the tenant and even then if they refuse to leave, the landlord cannot physically evict the tenant themselves. They will need to get the bailiffs to remove them from the property.

Illegal Eviction and Harassment

Tenants are entitled to report landlords to the police if any of the following are undertaken:

• Cutting off a tenant's water, gas or electricity supply
• Using threatening behaviour to make the tenant leave
• Trying to make the tenant sign an agreement that takes away their legal rights
• Interfering with the tenants possessions
• Moving into part of the tenant's property
• Physically removing the tenant out of the property
• Changing the locks
• Stopping the tenant from getting into part of the property

If this behaviour gets reported, tenants may be able to get an injunction against their landlord, which will prevent the landlord threatening the tenant in any way and will allow the tenant to remain in the property.

Inland Revenue

The Inland Revenue also performs random spot checks on lettings agents to ensure that their end of year tax reports is fully compliant. Where appropriate and requested by the Revenue, agents need to provide an annual tax report, (called a Section 19 return), that shows which landlords own which properties and how much income the agent has received on their behalf for the year. The onus is entirely with the agent to provide this completed form.

Compulsory Forms

Under the Inland Revenue's non-resident landlord regulations, landlords are able to register with the Centre for Non-Residence and deal with their own income tax affairs. However, those landlords that decline to register or are ignorant of the rules then impose the reporting requirements on their agents. The agents must then collect tax at the prevailing rate (currently 20%) and pay using the forms described. Those agents that fail to collect the tax from the landlord have a duty to pay and therefore must pay from their own funds.

Tenancy Agreements

It is vital to have a tenancy agreement signed before any tenant occupies a property. A tenancy agreement is essential for making the tenant's obligations clear, as well as the limitations of their rights.

Although contracts vary on aspects such as property type and price, there are several common details to all, which include:

• Names and addresses of both the tenant and the landlord
• The property address that is being let
• The date of entry into the rented property and the termination date
• The rental amount and frequency of payment
• The amount of deposit required
• The type of tenancy e.g. short term or assured tenancy
• Details of the notice period needed to leave the property.

However, too many lettings agents and landlords are making the mistake of not running their agreement template past a lettings specialist or solicitor, which can result in restricted rights to either the tenant or the landlord.

It is imperative for all landlords, whether they are brand new landlords with just one property available for rental, or landlords that have been in the business for a lifetime with a portfolio of hundreds of properties, to take notice of the legal requirements and compliance issues surrounding rental properties.

If landlords use a letting agent, then they can take advantage of the agent's specialist software, which will take the guesswork out of the legislative obligations and ensure that the landlords are fully compliant and up to date with the law – therefore better equipped to deal with any disputes that might occur within a tenancy.

Designed to make a difference within the residential lettings sector, C.A.R.L. Communications is a highly acclaimed residential lettings and property management software package, introduced to the market in 1997 for lettings and management agents and landlords. For information on C.A.R.L Communications and its lettings and management software for agents and landlords, please call 0845 3455591 or alternatively email admin@carlcomms.co.uk or visit www.carlcomms.co.uk.